TABLE OF CONTENTS
CISCO SYSTEMS, INC.
September 19, 2006
DEAR CISCO SYSTEMS SHAREHOLDER:
You are cordially invited to attend the Annual Meeting of Shareholders of Cisco Systems, Inc., which will
be held at the Santa Clara Convention Center in Exhibit Hall A, located at 5001 Great America Parkway, Santa
Clara, California on Wednesday, November 15, 2006, at 10:00 a.m. Pacific Time. You will find a map with
directions to the meeting on the outside back cover of the Proxy Statement.
Details of the business to be conducted at the meeting are given in the attached Notice of Annual Meeting of
Shareholders and the attached Proxy Statement.
Whether or not you plan to attend the meeting, please vote as soon as possible. You may vote via the
Internet, by telephone or by mailing a completed proxy card as an alternative to voting in person at the meeting.
Voting by any of these methods will ensure your representation at the meeting.
We look forward to seeing you at the meeting.
|
John T. Chambers
President and Chief Executive Officer |
San Jose, California
YOUR VOTE IS IMPORTANT
In order to ensure your representation at the meeting, please complete, sign and date the enclosed
proxy as promptly as possible and return it in the enclosed envelope (to which no postage need be affixed if
mailed in the United States) or submit your proxy and voting instructions via the Internet or by telephone.
Please refer to the section entitled “Voting via the Internet, by Telephone or by Mail” on page 2 of the
Proxy Statement for a description of these voting methods.
|
CISCO SYSTEMS, INC.
170 West Tasman Drive
San Jose, California 95134-1706
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held November 15, 2006
The Annual Meeting of Shareholders of Cisco Systems, Inc. will be held at the Santa Clara Convention
Center in Exhibit Hall A, located at 5001 Great America Parkway, Santa Clara, California on Wednesday,
November 15, 2006, at 10:00 a.m. Pacific Time for the following purposes:
- To elect ten members of Cisco’s Board of Directors;
- To ratify the appointment of PricewaterhouseCoopers LLP as Cisco’s independent registered public
accounting firm for the fiscal year ending July 28, 2007;
- To vote upon three proposals submitted by shareholders, if properly presented at the meeting; and
- To act upon such other matters as may properly come before the meeting or any adjournments or
postponements thereof.
The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice.
The record date for determining those shareholders who will be entitled to notice of, and to vote at, the meeting
and at any adjournments or postponements thereof is September 18, 2006. The stock transfer books will not be
closed between the record date and the date of the meeting. A list of shareholders entitled to vote at the meeting
will be available for inspection at Cisco’s principal executive offices at the address listed above.
Whether or not you plan to attend the meeting, please vote as soon as possible. As an alternative to voting in
person at the meeting, you may vote via the Internet, by telephone or by mailing a completed proxy card. For
detailed information regarding voting instructions, please refer to the section entitled “Voting via the Internet, by
Telephone or by Mail” on page 2 of the Proxy Statement. You may revoke a previously delivered proxy at any
time prior to the meeting. If you decide to attend the meeting and wish to change your proxy vote, you may do so
automatically by voting in person at the meeting.
|
BY ORDER OF THE BOARD OF DIRECTORS
Mark Chandler
Secretary
|
San Jose, California
September 19, 2006
CISCO SYSTEMS, INC.
170 West Tasman Drive
San Jose, California 95134-1706
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
These proxy materials are provided in connection with the solicitation of proxies by the Board of Directors
of Cisco Systems, Inc., a California corporation, for the Annual Meeting of Shareholders to be held at 10:00 a.m.
Pacific Time on Wednesday, November 15, 2006, at the Santa Clara Convention Center in Exhibit Hall A,
located at 5001 Great America Parkway, Santa Clara, California, and at any adjournments or postponements of
the meeting. These proxy materials were first mailed on or about September 25, 2006 to all shareholders entitled
to vote at the meeting.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the meeting are summarized in the accompanying
Notice of Annual Meeting of Shareholders. Each proposal is described in more detail in this Proxy Statement.
VOTING RIGHTS AND SOLICITATION
Voting
Only shareholders of record of Cisco common stock on September 18, 2006, the record date, will be entitled
to vote at the meeting. Each shareholder of record will be entitled to one vote on each matter for each share of
common stock held on the record date. On the record date, there were 6,086,712,797 shares of common stock
outstanding. A majority of the outstanding shares of common stock must be present or represented by proxy at
the meeting in order to have a quorum. Abstentions and broker non-votes will be treated as shares present for the
purpose of determining the presence of a quorum for the transaction of business at the meeting. A broker
non-vote occurs when a bank, broker or other shareholder of record holding shares for a beneficial owner submits
a proxy for the meeting but does not vote on a particular proposal because that holder does not have discretionary
voting power with respect to that proposal and has not received instructions from the beneficial owner.
In the election of directors, the ten nominees receiving the highest number of affirmative votes will be
elected. Shareholders may not cumulate votes in the election of directors. Abstentions and broker non-votes have
no effect for purposes of the election of directors, as only votes “for” are counted in determining which nominees
have received the highest number of affirmative votes. Proposal Nos. 2, 3, 4 and 5 require the approval of the
affirmative vote of a majority of the shares of common stock present or represented by proxy and voting at the
meeting, together with the affirmative vote of a majority of the required quorum. Abstentions and broker
non-votes could prevent approval of such proposals if the number of affirmative votes, though a majority of the
votes represented and cast, does not constitute a majority of the required quorum. If the persons present or
represented by proxy at the meeting constitute the holders of less than a majority of the outstanding shares of
common stock as of the record date, the meeting may be adjourned to a subsequent date for the purpose of
obtaining a quorum. The inspector of elections appointed for the meeting will separately tabulate affirmative and
negative votes, abstentions and broker non-votes.
Recommendations of the Board of Directors
Cisco’s Board of Directors recommends that you vote FOR each of the nominees of the Board of Directors
(Proposal No. 1), FOR the ratification of the appointment of PricewaterhouseCoopers LLP as Cisco’s independent registered public accounting firm for the fiscal year ending July 28, 2007 (Proposal No. 2), and
AGAINST each of the three proposals submitted by shareholders (Proposal Nos. 3, 4 and 5).
Voting via the Internet, by Telephone or by Mail
Shareholders whose shares are registered in their own names may vote via the Internet, by telephone or by
mailing a completed proxy card as an alternative to voting in person at the meeting. Instructions for voting via
the Internet or by telephone are set forth on the enclosed proxy card. To vote by mailing a proxy card, sign and
return the enclosed proxy card in the enclosed prepaid and addressed envelope, and your shares will be voted at
the meeting in the manner you direct. In the event that you return a signed proxy card on which no directions are
specified, your shares will be voted FOR each of the nominees of the Board of Directors (Proposal No. 1), FOR
the ratification of the appointment of PricewaterhouseCoopers LLP as Cisco’s independent registered public
accounting firm for the fiscal year ending July 28, 2007 (Proposal No. 2), AGAINST each of the three proposals
submitted by shareholders (Proposal Nos. 3, 4 and 5), and in the discretion of the proxy holders as to any other
matters that may properly come before the annual meeting or any postponement or adjournment of the annual
meeting.
If your shares are registered in the name of a bank or brokerage firm you will receive instructions from your
holder of record that must be followed in order for the record holder to vote the shares per your instructions.
Many banks and brokerage firms have a process for their beneficial holders to provide instructions over the
phone or via the Internet. If Internet or telephone voting is unavailable from your bank or brokerage firm, please
complete and return the enclosed voting instruction card in the addressed, postage paid envelope provided. If you
hold shares through a bank or brokerage firm and wish to be able to vote in person at the meeting, you must
obtain a legal proxy from your brokerage firm, bank or other holder of record and present it to the inspector of
elections with your ballot. Shareholders who elected to receive the 2006 Proxy Statement and Annual Report to
Shareholders over the Internet will be receiving an e-mail on or about October 6, 2006 with information on how
to access shareholder information and instructions for voting.
You may revoke or change a previously delivered proxy at any time before the meeting by delivering
another proxy with a later date or by delivering written notice of revocation of your proxy to Cisco’s Secretary at
Cisco’s principal executive offices before the beginning of the meeting. You may also revoke your proxy by
attending the meeting and voting in person, although attendance at the meeting will not in and of itself revoke a
valid proxy that was previously delivered. If you hold shares through a bank or brokerage firm, you must contact
that bank or brokerage firm to revoke any prior voting instructions. You may also vote in person at the annual
meeting if you obtain a legal proxy as described in the preceding paragraph.
Proxy Solicitation Costs
Cisco will bear the entire cost of this solicitation of proxies, including the preparation, assembly, printing,
and mailing of this Proxy Statement, the proxy and any additional solicitation material that Cisco may provide to
shareholders. Copies of solicitation material will be provided to brokerage firms, fiduciaries and custodians
holding shares in their names that are beneficially owned by others so that they may forward the solicitation
material to such beneficial owners. In addition, Cisco has retained Georgeson Shareholder Communications, Inc.
to act as a proxy solicitor in conjunction with the meeting. Cisco has agreed to pay that firm $17,500, plus
reasonable out of pocket expenses, for proxy solicitation services. The original solicitation of proxies by mail
may be supplemented by solicitation by telephone, telegram and other means by directors, officers and
employees of Cisco. No additional compensation will be paid to these individuals for any such services.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
General
The names of persons who are nominees for director and their positions and offices with Cisco are set forth
in the table below. The proxy holders intend to vote all proxies received by them for the nominees listed below
unless otherwise instructed. The authorized number of directors is presently twelve, and in connection with the
election of directors at the annual meeting the authorized number of directors is being reduced to ten.
Each of the current directors, other than Chairman of the Board John P. Morgridge and Director James C.
Morgan, has been nominated for election by the Board of Directors upon recommendation by the Nomination
and Governance Committee and has decided to stand for re-election. Mr. Morgridge was not eligible to be
renominated for election under Cisco’s age limit policy adopted in July 2005. Accordingly, the Board of
Directors has adopted a board chairmanship succession plan that designates John T. Chambers to succeed
Mr. Morgridge as Chairman of the Board effective upon Mr. Chambers’ re-election to the Board of Directors.
Mr. Chambers will retain his position as Chief Executive Officer. Mr. Morgridge intends to serve on the Board of
Directors through the date of the annual meeting and effective at such time he will become Chairman Emeritus.
In this role, Mr. Morgridge will focus on the Cisco Foundation and Cisco’s long-term commitment to meeting
basic human needs, promoting responsible citizenship and providing access to education. Mr. Morgan has
decided to retire from the Board of Directors and not to stand for re-election but intends to serve on the Board of
Directors through the date of the annual meeting.
Michael D. Capellas was appointed to the Board of Directors in January 2006 upon the recommendation of
the Nomination and Governance Committee. Mr. Capellas was brought to the attention of the Nomination and
Governance Committee as a potential candidate during a general discussion by the Board of Directors.
Proxies may not be voted for more than ten directors. In the event any nominee is unable or declines to serve
as a director at the time of the meeting, the proxies will be voted for such nominee, if any, who may be
designated by the Board of Directors to fill the vacancy. As of the date of this Proxy Statement, the Board of
Directors is not aware that any nominee is unable or will decline to serve as a director. The ten nominees
receiving the highest number of affirmative votes of the shares entitled to vote at the meeting will be elected to
the Board of Directors to serve until the next annual meeting of shareholders and until their successors have been
elected and qualified. Shareholders may not cumulate votes in the election of directors.
Nominees |
Positions and Offices Held with Cisco |
Carol A. Bartz |
Lead Independent Director |
M. Michele Burns |
Director |
Michael D. Capellas |
Director |
Larry R. Carter |
Senior Vice President, Office of the President and Director |
John T. Chambers |
President, Chief Executive Officer and Director |
Dr. John L. Hennessy |
Director |
Richard M. Kovacevich |
Director |
Roderick C. McGeary |
Director |
Steven M. West |
Director |
Jerry Yang |
Director |
Business Experience of Nominees
Ms. Bartz, 58, has been a member of the Board of Directors since November 1996 and has served as Lead
Independent Director since November 2005. Since May 2006, she has been Executive Chairman of the Board of
Autodesk, Inc. From April 1992 to April 2006, she served as Chairman of the Board and Chief Executive Officer of Autodesk. Prior to that, she was employed by Sun Microsystems, Inc. from 1983 to April 1992. Ms. Bartz also
currently serves on the board of directors of Network Appliance, Inc.
Ms. Burns, 48, has been a member of the Board of Directors since November 2003. She has been Executive
Vice President and Chief Financial Officer of Marsh & McLennan Companies, Inc. since March 2006. From
May 2004 to January 2006, she served as Executive Vice President, Chief Financial Officer and Chief
Restructuring Officer of Mirant Corporation. From August 2000 to April 2004, she served as Executive Vice
President and Chief Financial Officer of Delta Air Lines, Inc., which in September 2005 filed for protection
under Chapter 11 of the United States Bankruptcy Code. From January 1999 to August 2000 she held various
positions in Delta’s finance and tax departments. Prior to that, Ms. Burns was a partner at Arthur Andersen LLP
from 1991 to January 1999. Ms. Burns also currently serves on the board of directors of Wal-Mart Stores, Inc.
Mr. Capellas, 52, has been a member of the Board of Directors since January 2006. From November 2002 to
January 2006, he served as Chief Executive Officer of MCI, Inc., which was known as WorldCom, Inc. prior to
its emergence from bankruptcy in April 2004, and in March 2004 he was additionally named as that company’s
President. From November 2002 to March 2004, he was also Chairman of the Board of WorldCom. Mr. Capellas
left MCI as planned in early January 2006 upon its acquisition by Verizon Communications Inc. Previously,
Mr. Capellas was President of Hewlett-Packard Company from May 2002 to November 2002. Before the merger
of Hewlett-Packard and Compaq Computer Corporation in May 2002, Mr. Capellas was President and Chief
Executive Officer of Compaq, a position he had held since July 1999, and Chairman of the Board of Compaq, a
position he had held since September 2000. Mr. Capellas held earlier positions as Chief Information Officer and
Chief Operating Officer of Compaq. From 1997 to 1998, Mr. Capellas was a Senior Vice President with Oracle
Corporation.
Mr. Carter, 63, has been a member of the Board of Directors since July 2000. He joined Cisco in January
1995 as Vice President of Finance and Administration, Chief Financial Officer and Secretary. In July 1997, he
was promoted to Senior Vice President of Finance and Administration, Chief Financial Officer and Secretary. In
May 2003, upon his retirement as Chief Financial Officer and Secretary, he was appointed Senior Vice President,
Office of the President. Before joining Cisco, he was employed by Advanced Micro Devices, Inc. as Vice
President and Corporate Controller. Mr. Carter also currently serves on the board of directors of QLogic
Corporation.
Mr. Chambers, 57, has been a member of the Board of Directors since November 1993. He joined Cisco as
Senior Vice President in January 1991 and was promoted to Executive Vice President in June 1994.
Mr. Chambers was promoted to President and Chief Executive Officer of Cisco as of January 31, 1995. Before
joining Cisco, he was employed by Wang Laboratories, Inc. for eight years, where, in his last role, he was the
Senior Vice President of U.S. Operations.
Dr. Hennessy, 53, has been a member of the Board of Directors since January 2002. He has been President of
Stanford University since September 2000. He served as Provost of Stanford from June 1999 to August 2000, Dean
of the Stanford University School of Engineering from June 1996 to June 1999, and Chair of the Stanford
University Department of Computer Science from September 1994 to March 1996. Dr. Hennessy also currently is
the Chairman of the Board of Atheros Communications, Inc. and serves on the board of directors of Google Inc.
Mr. Kovacevich, 62, has been a member of the Board of Directors since January 2005. He has served as
Chief Executive Officer of Wells Fargo & Company since November 1998, and became Chairman of the Board
of Wells Fargo & Company in April 2001. He also served as President of Wells Fargo & Company from
November 1998 to July 2005. From January 1993 to November 1998, he served as Chief Executive Officer of
Norwest Corporation, which merged with Wells Fargo & Company in November 1998. He also served as
President of Norwest Corporation from January 1993 through January 1997 and as Chairman of the Board of
Norwest Corporation from May 1995 to November 1998. He became a member of the board of directors of
Norwest Corporation in 1986. Mr. Kovacevich also currently serves on the board of directors of Target
Corporation.
Mr. McGeary, 56, has been a member of the Board of Directors since July 2003. He has served as Chairman
of the Board of BearingPoint, Inc. since November 2004. From November 2004 to March 2005, he also served as
interim Chief Executive Officer of BearingPoint, Inc. Mr. McGeary served as Chief Executive Officer of
Brience, Inc. from July 2000 to July 2002. From April 2000 to June 2000 he served as a Managing Director of
KPMG Consulting LLC, a wholly owned subsidiary of BearingPoint, Inc. (formerly KPMG Consulting, Inc.).
From August 1999 to April 2000 he served as Co-President and Co-Chief Executive Officer of BearingPoint, Inc.
From January 1997 to August 1999 he was employed by KPMG LLP as its Co-Vice Chairman of Consulting.
Prior to 1997 he served in several capacities with KPMG LLP, including audit partner for technology clients.
Mr. McGeary is a Certified Public Accountant and holds a B.S. degree in Accounting from Lehigh University.
Mr. McGeary also currently serves on the board of directors of Dionex Corporation.
Mr. West, 51, has been a member of the Board of Directors since April 1996. He is a founder and partner of
Emerging Company Partners LLC, which was formed in January 2004. Mr. West served as Chief Operating
Officer of nCUBE Corporation, a provider of on-demand media systems, from December 2001 to July 2003.
Prior to joining nCUBE, he was the President and Chief Executive Officer of Entera, Inc. from September 1999
until it was acquired by Blue Coat Systems, Inc. (formerly CacheFlow Inc.) in January 2001. From June 1996 to
September 1999, he was President and Chief Executive Officer of Hitachi Data Systems, a joint venture
computer hardware services company owned by Hitachi, Ltd. and Electronic Data Systems Corporation. Prior to
that, Mr. West was at Electronic Data Systems Corporation from November 1984 to June 1996.
Mr. Yang, 37, has been a member of the Board of Directors since July 2000. He is a founder of Yahoo! Inc.,
and since March 1995 has been an executive of Yahoo! Inc. and has served as a member of its board of directors.
Corporate Governance
Cisco maintains a corporate governance page on its website which includes key information about its corporate governance initiatives, including Cisco’s Corporate Governance Policies, Cisco’s Code of Business Conduct, and charters for each of the committees of the Board of Directors. The corporate governance page can be found at www.cisco.com, by clicking on "About Cisco," and then on "Corporate Governance," under "Investor Relations."
Cisco’s policies and practices reflect corporate governance initiatives that are compliant with the listing
requirements of NASDAQ and the corporate governance requirements of the Sarbanes-Oxley Act of 2002,
including:
- The Board of Directors has adopted clear corporate governance policies;
- A majority of the board members are independent of Cisco and its management;
- All members of the key board committees—the Audit Committee, the Compensation and Management
Development Committee, and the Nomination and Governance Committee—are independent;
- The independent members of the Board of Directors meet regularly without the presence of
management;
- Cisco has a clear code of business conduct that is monitored by its ethics office and is annually affirmed
by its employees;
- The charters of the board committees clearly establish their respective roles and responsibilities;
- Cisco has an ethics office with a hotline available to all employees, and Cisco’s Audit Committee has
procedures in place for the anonymous submission of employee complaints on accounting, internal
accounting controls, or auditing matters;
- Cisco has adopted a code of ethics that applies to its principal executive officer and all members of its
finance department, including the principal financial officer and principal accounting officer; and
- Cisco’s internal audit control function maintains critical oversight over the key areas of its business and
financial processes and controls, and reports directly to Cisco’s Audit Committee.
Independent Directors
The Board of Directors has affirmatively determined that each member of the Board of Directors other than
Mr. Carter, Mr. Chambers and Mr. Morgridge is independent under the criteria established by NASDAQ for
independent board members. All members of each of Cisco’s Audit, Compensation and Management
Development, and Nomination and Governance committees are independent directors. In addition, the Board of
Directors has determined that the members of the Audit Committee meet the additional independence criteria
required for audit committee membership under applicable NASDAQ listing standards. As Lead Independent
Director, Ms. Bartz presides over regular meetings of the independent directors.
Board Committees and Meetings
During Cisco’s fiscal year ended July 29, 2006, the Board of Directors held seven meetings. During this
period, all of the incumbent directors attended or participated in more than 75% of the aggregate of the total
number of meetings of the Board of Directors and the total number of meetings held by all committees of the
Board of Directors on which each such director served, during the period for which each such director served.
Cisco’s directors are strongly encouraged to attend the annual meeting of shareholders. Ten of Cisco’s directors
attended last year’s annual meeting.
Cisco has six standing committees: the Acquisition Committee, the Audit Committee, the Compensation
and Management Development Committee, the Investment/Finance Committee, the Nomination and Governance
Committee, and the Technology Committee. Each of these committees has a written charter approved by the
Board of Directors. A copy of each charter can be found under the Investor Relations section of our website at
www.cisco.com. The members of the committees are identified in the following table.
Director |
Acquisition Committee
|
Audit Committee
|
Compensation and Management Development Committee
|
Investment/Finance Committee
|
Nomination and Governance Committee
|
Technology Committee
|
Carol A. Bartz |
|
|
Chair
|
|
X
|
|
M. Michele Burns |
X
|
X
|
|
|
|
|
Michael D. Capellas |
|
|
X
|
|
|
|
Larry R. Carter |
|
|
|
X
|
|
|
John T. Chambers |
X
|
|
|
|
|
|
Dr. John L. Hennessy |
Chair
|
|
|
|
|
Chair
|
Richard M. Kovacevich |
|
|
|
|
Chair
|
|
Roderick C. McGeary |
|
X
|
|
|
|
|
James C. Morgan |
|
|
X
|
Chair
|
X
|
|
John P. Morgridge |
X
|
|
|
X
|
|
|
Steven M. West |
|
Chair
|
|
X
|
|
|
Jerry Yang |
|
|
X
|
|
|
X
|
Acquisition Committee
The Acquisition Committee reviews acquisition strategies and opportunities with management, approves
certain acquisitions and investment transactions and also makes recommendations to the Board of Directors. This
committee held two meetings during the last fiscal year.
Audit Committee
The Audit Committee is responsible for reviewing the financial information which will be provided to
shareholders and others, reviewing the system of internal controls which management and the Board of Directors
have established, appointing, retaining and overseeing the performance of Cisco’s independent registered public
accounting firm, overseeing Cisco’s accounting and financial reporting processes and the audits of Cisco’s
financial statements, and pre-approving audit and permissible non-audit services provided by the independent
registered public accounting firm. This committee held fourteen meetings during the last fiscal year. The Board
of Directors has determined that each of Ms. Burns and Mr. McGeary is an “audit committee financial expert” as
defined in Item 401(h) of Regulation S-K. Each member of this committee is an independent director and meets
each of the other requirements for audit committee members under applicable NASDAQ listing standards.
Compensation and Management Development Committee
The Compensation and Management Development Committee’s (the “Compensation Committee”) basic
responsibility is to review the performance and development of Cisco’s management in achieving corporate goals
and objectives and to assure that Cisco’s senior executives are compensated effectively in a manner consistent
with Cisco’s strategy, competitive practice, and the requirements of the appropriate regulatory bodies. Toward
that end, this committee oversees, reviews and administers all of Cisco’s compensation, equity and employee
benefit plans and programs. This committee held seven meetings during the last fiscal year. Each member of this
committee is an independent director under applicable NASDAQ listing standards, an “outside director” as
defined in Section 162(m) of the Internal Revenue Code and a “non-employee director” as defined in Rule 16b-3
under the Securities Exchange Act of 1934.
The Compensation Committee has the exclusive authority and responsibility to determine all aspects of
executive compensation packages for executive officers and makes recommendations to the Board of Directors
regarding the compensation of non-employee directors. The Compensation Committee has engaged Frederic W.
Cook & Co., Inc. (“FWC”) as its independent compensation consultant to help the Compensation Committee
establish and implement its compensation philosophy and to evaluate compensation proposals recommended by
management. The Human Resources Department presents management proposals to the Compensation
Committee and FWC. FWC works directly with the Compensation Committee (and not on behalf of
management) to assist the Compensation Committee in satisfying its responsibilities.
Investment/Finance Committee
The Investment/Finance Committee reviews and approves Cisco’s global investment policy, reviews
minority investments, fixed income assets, insurance risk management policies and programs and tax program,
oversees Cisco’s stock repurchase programs, and also reviews Cisco’s currency, interest rate and equity risk
management policies. This committee is also authorized to approve the issuance of debt securities, certain real
estate acquisitions and leases, and charitable contributions made on behalf of Cisco. This committee held three
meetings during the last fiscal year.
Nomination and Governance Committee
The Nomination and Governance Committee is responsible for overseeing, reviewing and making periodic
recommendations concerning Cisco’s corporate governance policies, and for recommending to the full Board of
Directors candidates for election to the Board of Directors. This committee held four meetings during the last
fiscal year. Each member of this committee is an independent director under applicable NASDAQ listing
standards.
Nominees for the Board of Directors should be committed to enhancing long-term shareholder value and
must possess a high level of personal and professional ethics, sound business judgment and integrity. The Board
of Directors’ policy is to encourage selection of directors who will contribute to Cisco’s overall corporate goals:
responsibility to its shareholders, technology leadership, effective execution, high customer satisfaction and
superior employee working environment. The Nomination and Governance Committee may from time to time
review the appropriate skills and characteristics required of board members, including such factors as business
experience, diversity, and personal skills in technology, finance, marketing, international business, financial
reporting and other areas that are expected to contribute to an effective Board of Directors. In evaluating
potential candidates for the Board of Directors, the Nomination and Governance Committee considers these
factors in the light of the specific needs of the Board of Directors at that time.
In recommending candidates for election to the Board of Directors, the Nomination and Governance
Committee considers nominees recommended by directors, officers, employees, shareholders and others, using
the same criteria to evaluate all candidates. The Nomination and Governance Committee reviews each
candidate’s qualifications, including whether a candidate possesses any of the specific qualities and skills
desirable in certain members of the Board of Directors. Evaluations of candidates generally involve a review of
background materials, internal discussions and interviews with selected candidates as appropriate. Upon selection
of a qualified candidate, the Nomination and Governance Committee would recommend the candidate for
consideration by the full Board of Directors. The Nomination and Governance Committee may engage
consultants or third-party search firms to assist in identifying and evaluating potential nominees. To recommend
a prospective nominee for the Nomination and Governance Committee’s consideration, submit the candidate’s
name and qualifications to Cisco’s Secretary in writing to the following address: Cisco Systems, Inc., Attn:
Secretary, 170 West Tasman Drive, San Jose, California 95134, with a copy to Cisco Systems, Inc., Attn:
General Counsel at the same address. When submitting candidates for nomination to be elected at the Company’s
annual meeting of shareholders, shareholders must also follow the notice procedures and provide the information
required by Cisco’s bylaws.
In particular, for the Nomination and Governance Committee to consider a candidate recommended by a
shareholder for nomination at the 2007 Annual Meeting of Shareholders, the recommendation must be delivered
or mailed to and received by Cisco’s Secretary between June 27, 2007 and July 27, 2007 (or, if the 2007 annual
meeting is not held within 30 days of the anniversary of the date of the 2006 annual meeting, within 10 days after
Cisco’s public announcement of the date of the 2007 annual meeting). The recommendation must include the
same information as is specified in Cisco’s bylaws for shareholder nominees to be considered at an annual
meeting, including the following:
- The shareholder’s name and address and the beneficial owner, if any, on whose behalf the nomination is
proposed;
- The shareholder’s reason for making the nomination at the annual meeting, and the signed consent of
the nominee to serve if elected;
- The number of shares owned by, and any material interest of, the record owner and the beneficial owner,
if any, on whose behalf the record owner is proposing the nominee;
- A description of any arrangements or understandings between the shareholder, the nominee and any
other person regarding the nomination; and
- Information regarding the nominee that would be required to be included in Cisco’s proxy statement by
the rules of the Securities and Exchange Commission, including the nominee’s age, business experience
for the past five years and any other directorships held by the nominee.
Technology Committee
The Technology Committee is responsible for reviewing Cisco’s technology development and strategic
opportunities, including in the context of Cisco’s long term strategic planning in both new and existing
businesses and markets. This committee did not meet during the last fiscal year.
Director Compensation
NON-EMPLOYEE DIRECTOR COMPENSATION
Name |
Fees Earned or Paid in Cash ($)
|
Stock Awards ($)(1)
|
Option Awards (#)
|
Carol A. Bartz |
$ 58,014 |
$74,986 |
20,000 |
M. Michele Burns |
$107,000 |
— |
20,000 |
Michael D. Capellas |
$ 62,500 |
— |
50,000 |
Dr. James F. Gibbons (2) |
$ 8,000 |
— |
— |
Dr. John L. Hennessy |
$ 39,507 |
$37,493 |
20,000 |
Richard M. Kovacevich |
$ 81,000 |
— |
20,000 |
Roderick C. McGeary |
$103,000 |
— |
20,000 |
James C. Morgan |
$ 26,014 |
$74,986 |
20,000 |
Donald T. Valentine (2) |
$ 4,000 |
— |
— |
Steven M. West |
$115,262 |
$18,738 |
20,000 |
Jerry Yang |
$ 87,000 |
— |
20,000 |
(1) As described below, represents the value of fully vested shares of Cisco common stock received in lieu of
all or a specified portion of the non-employee director’s regular annual cash retainer based on the fair
market value of the shares on November 15, 2005, the date the regular annual cash retainer would otherwise
have been paid. Based on each director’s prior election, Ms. Bartz received 4,342 shares, Dr. Hennessy
received 2,171 shares, Mr. Morgan received 4,342 shares and Mr. West received 1,085 shares. Please see
the table under “Ownership of Securities” on page 19 of this proxy statement for the beneficial ownership of
Cisco common stock held by each of Cisco’s incumbent directors.
(2) Dr. Gibbons and Mr. Valentine were not eligible to be renominated for election at the 2005 annual meeting
of shareholders under Cisco’s age limit policy. Each served on the Board of Directors through the date of
the 2005 annual meeting of shareholders.
During the 2006 fiscal year, cash fees earned by non-employee directors were as follows:
- Annual retainer fee of $75,000 for each non-employee director re-elected at the 2005 annual meeting of
shareholders for the year of board service beginning upon election at the 2005 annual meeting of
shareholders, except that four non-employee directors elected to receive fully vested shares of Cisco
common stock in lieu of all or a portion of his or her regular annual cash retainer fee as described below
and in footnote (1) to the “Non-Employee Director Compensation” table above;
- Annual retainer fee of $62,500 for Mr. Capellas, whose period of board service did not commence until
January 2006;
- Additional annual retainer fee of $30,000 for Ms. Bartz for serving as Lead Independent Director;
- Additional annual retainer fee of $25,000 for Mr. West for serving as chair of the Audit Committee;
- Additional annual retainer fee of $10,000 for Ms. Bartz for serving as chair of the Compensation
Committee; and
- Additional fee of $2,000 to each committee member for each standing committee meeting attended.
To facilitate share ownership, non-employee directors may elect to receive fully vested shares of Cisco
common stock in lieu of all or a specified portion of their regular annual cash retainer based on the fair market
value of the shares on the date any regular annual cash retainer would otherwise be paid. Any shares received in
lieu of any portion of a regular annual cash retainer do not count against the limit on the total number of shares
that may be granted to a non-employee director during any fiscal year. Any shares issued will be granted under the 2005 Stock Incentive Plan. In fiscal 2006, Ms. Bartz, Dr. Hennessy, Mr. Morgan and Mr. West each elected
to receive shares in lieu of part or all of their regular annual cash retainer, as shown in the “Stock Awards”
column in the table above.
During the 2006 fiscal year, non-employee directors were eligible to participate in the Discretionary Option
Grant Program in effect under the 1996 Stock Incentive Plan and to receive periodic option grants under the
Automatic Option Grant Program in effect under the 1996 Stock Incentive Plan. Non-employee directors were
also reimbursed for their expenses in attending meetings.
On November 15, 2005, the date of the last annual meeting of shareholders, each of the following
non-employee directors re-elected to the Board of Directors received option grants under the 1996 Stock
Incentive Plan for 20,000 shares of common stock with an exercise price of $17.27 per share: Ms. Bartz,
Ms. Burns, Dr. Hennessy, Mr. Kovacevich, Mr. McGeary, Mr. Morgan, Mr. West, and Mr. Yang. The shares
subject to these options vest in two equal annual installments upon the completion of each year of board service.
Mr. Capellas received initial option grants under the 1996 Stock Incentive Plan for 50,000 shares upon his
appointment to the Board of Directors on January 31, 2006, with an exercise price of $18.57 per share. The
shares subject to these options vest in four equal annual installments upon the completion of each year of board
service. The exercise price for each option is equal to the closing selling price per share of common stock on the
grant date. Each option has a term of nine years measured from the grant date, subject to earlier termination
following the optionee’s cessation of board service. Each option is immediately exercisable for all of the shares
underlying the option; however, any shares so purchased that remain unvested at the time of the optionee’s
cessation of board service will be subject to Cisco’s right to repurchase those shares, at the option exercise price
paid per share. Shares underlying the options vest immediately in full upon certain changes in control or
ownership of Cisco or upon the optionee’s death or disability while a member of the Board of Directors.
On September 18, 2006, the Board of Directors approved modifications to the annual equity grant
arrangements for re-elected non-employee directors. Beginning with the 2006 annual meeting of shareholders,
re-elected non-employee directors will receive an annual option grant to purchase 15,000 shares plus an annual
grant of 5,000 shares of restricted stock. The shares subject to the options vest in two equal annual installments
upon the completion of each year of board service and the restricted stock will fully vest upon the completion of
one year of board service. Until the 1996 Stock Incentive Plan expires on or before December 31, 2006, these
option grants will be issued pursuant to the 1996 Stock Incentive Plan. Thereafter, the option grants will be
issued pursuant to the 2005 Stock Incentive Plan and all grants of restricted stock will be issued under the 2005
Stock Incentive Plan. The 2005 Stock Incentive Plan does not provide for automatic grants to non-employee
directors, but instead provides for discretionary awards to non-employee directors which may not exceed 50,000
shares for any non-employee director in any fiscal year.
Shareholder Communications with the Board of Directors
Shareholders may communicate with Cisco’s Board of Directors through Cisco’s Secretary by sending an
email to bod@cisco.com, or by writing to the following address: Board of Directors, c/o Secretary, Cisco
Systems, Inc., 170 West Tasman Drive, San Jose, California 95134. Cisco’s Secretary will forward all
correspondence to the Board of Directors, except for spam, junk mail, mass mailings, product complaints or
inquiries, job inquiries, surveys, business solicitations or advertisements, or patently offensive or otherwise
inappropriate material. Cisco’s Secretary may forward certain correspondence, such as product-related inquiries,
elsewhere within Cisco for review and possible response.
Recommendation of the Board of Directors
The Board of Directors recommends that the shareholders vote FOR the election of each of the nominees listed herein.
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
General
Cisco is asking the shareholders to ratify the Audit Committee’s appointment of PricewaterhouseCoopers
LLP as Cisco’s independent registered public accounting firm for the fiscal year ending July 28, 2007. In the
event the shareholders fail to ratify the appointment, the Audit Committee will reconsider this appointment. Even
if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different
independent registered public accounting firm at any time during the year if the Audit Committee determines that
such a change would be in Cisco’s and its shareholders’ best interests.
PricewaterhouseCoopers LLP has audited Cisco’s consolidated financial statements annually since Cisco’s
1988 fiscal year. Representatives of PricewaterhouseCoopers LLP are expected to be present at the meeting and
will have the opportunity to make a statement if they desire to do so. It is also expected that those representatives
will be available to respond to appropriate questions.
Principal Accountant Fees and Services
The following is a summary of the fees billed to Cisco by PricewaterhouseCoopers LLP for professional
services rendered for the fiscal years ended July 29, 2006 and July 30, 2005:
Fee Category |
Fiscal 2006 Fees |
Fiscal 2005 Fees |
Audit Fees |
$13,834,000 |
$11,295,000 |
Audit-Related Fees |
369,000 |
169,000 |
Tax Fees |
986,000 |
1,780,000 |
All Other Fees |
58,000 |
77,000 |
Total Fees |
$15,247,000 |
$13,321,000 |
Audit Fees. Consists of fees billed for professional services rendered for the integrated audit of Cisco’s
consolidated financial statements and of its internal control over financial reporting, for review of the interim
consolidated financial statements included in quarterly reports and for services that are normally provided by
PricewaterhouseCoopers LLP in connection with statutory and regulatory filings or engagements.
Audit-Related Fees. Consists of fees billed for assurance and related services that are reasonably related to
the performance of the audit or review of Cisco’s consolidated financial statements and are not reported under
“Audit Fees.” These services include employee benefit plan audits, accounting consultations in connection with
transactions, attest services that are not required by statute or regulation, and consultations concerning financial
accounting and reporting standards.
Tax Fees. Consists of fees billed for professional services for tax compliance, tax advice and tax planning.
These services include assistance regarding federal, state and international tax compliance, assistance with tax
reporting requirements and audit compliance, assistance with customs and duties compliance, value-added tax
compliance, mergers and acquisitions tax compliance, and tax advice on international, federal and state tax
matters. Tax compliance fees were $979,000 and $1,704,000 in fiscal 2006 and fiscal 2005, respectively. All
other tax fees were $7,000 and $76,000 in fiscal 2006 and fiscal 2005, respectively.
All Other Fees. Consists of fees for products and services other than the services reported above. These
services included expatriate relocation coordination services provided to Cisco employees on international job
assignments, translation of filings, and other miscellaneous services. No management consulting services were
provided.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent
Registered Public Accounting Firm
The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services to be provided
by the independent registered public accounting firm. These services may include audit services, audit-related
services, tax services and other services. Pre-approval is generally provided for up to one year and any
pre-approval is detailed as to the particular service or category of services and is generally subject to a specific
budget. The independent registered public accounting firm and management are required to report periodically to
the Audit Committee regarding the extent of services provided by the independent registered public accounting
firm in accordance with this pre-approval, and the fees for the services performed to date. The Audit Committee
may also pre-approve particular services on a case-by-case basis.
Recommendation of the Board of Directors
The Board of Directors recommends that the shareholders vote FOR the ratification of the appointment of
PricewaterhouseCoopers LLP to serve as Cisco’s independent registered public accounting firm for the fiscal
year ending July 28, 2007.
PROPOSAL NO. 3
SHAREHOLDER PROPOSAL
The AFL-CIO Reserve Fund, 815 Sixteenth Street, N.W., Washington, D.C. 20006, a beneficial owner of
3,900 shares of Cisco common stock, has notified us that it intends to present the following proposal at the
meeting:
Shareholder Proposal
RESOLVED, that the shareholders of Cisco Systems, Inc. (the “Company”) urge the Board of Directors to
adopt a policy that a significant portion of future equity compensation grants to senior executives shall be shares
of stock that require the achievement of performance goals as a prerequisite to vesting (“performance-vesting
shares”).
This policy shall apply to existing employment agreements and equity compensation plans only if the use of
performance-vesting shares can be legally implemented by the Company, and will otherwise apply to the design
of all future plans and agreements.
Supporting Statement
We believe that our Company’s compensation policies should encourage the ownership of stock by senior
executives in order to align their interests with those of shareholders. To achieve this goal, we favor granting
senior executives actual shares of stock that vest only after meeting specified performance goals. In our opinion,
performance-vesting shares are a better form of equity compensation than fixed-price stock options or time-vesting
restricted stock.
Fixed-price stock option grants provide senior executives with incentives that may not be in the best
interests of long-term shareholders. In our view, stock option grants promise executives all the benefit of share
price increases with none of the risk of share price declines. This asymmetrical incentive structure can reward
executives for share price volatility, a measure of investment risk. Stock options can also reward short-term
decision-making because many executives’ options can be exercised just one year after the grant date.
Furthermore, we believe that stock options can create a strong incentive to manipulate a company’s stock price
through questionable or even fraudulent accounting.
Leading investors and regulators have questioned the use of stock options to compensate executives.
Berkshire Hathaway CEO Warren Buffet has characterized fixed-price stock options as “really a royalty on the
passage of time.” Former Federal Reserve Chairman Alan Greenspan blamed poorly-structured options for the
‘infectious greed’ of the 1990s, because “they failed to properly align the long-term interests of shareholders and
managers.”
Similarly, we oppose granting executives time-vesting restricted stock that does not include any
performance requirements. In our view, time-vesting restricted stock rewards tenure, not performance. Instead,
we believe vesting requirements should be tailored to measure each individual executive’s performance through
disclosed benchmarks, in addition to the Company’s share price. To align their incentives with those of long-term
shareholders, we also believe that senior executives should be required to hold a significant portion of these
performance-vesting shares for as long as they remain executives of the Company.
Executive compensation consultant Pearl Meyer has said “if a company is going to issue restricted stock
grants as a way of making sure executives are owners rather than optionees, the grant should be earned on a
performance basis—it shouldn’t be just a giveaway.” Former SEC Chairman Richard Breeden has stated that
“there is not a strong reason for granting restricted stock rather than simply paying cash unless there are
performance hurdles to vesting.”
Cisco’s Statement in Opposition to Proposal No. 3
The Board of Directors believes this proposal does not serve the best interests of Cisco or its
shareholders and recommends a vote AGAINST it.
Executive compensation at Cisco is overseen by the Board of Directors through the Compensation
Committee. The Compensation Committee consists exclusively of independent directors who, with the assistance
of its independent compensation consultant, make decisions they believe are in the best interests of Cisco and our
shareholders. We have long supported the concept of performance-based incentive arrangements for senior
executives. In particular, we believe that the incentive programs for our senior executives should be determined
within a framework based on the achievement of designated financial and other targets. Furthermore, we believe
that executive compensation should be designed to attract, motivate and retain talented executives responsible for
our success.
We believe that we have already implemented a flexible compensation program for senior executives, which
links compensation to performance. We believe that adopting a policy that requires a significant portion of future
equity compensation grants to senior executives to automatically be performance-vesting restricted stock would
put us at a competitive disadvantage by severely restricting the Compensation Committee’s discretion to select
from among those compensation vehicles that best compensate our senior executives in a manner that is designed
to enable us to achieve our goals of long-term success and increased shareholder value.
We also believe that time-vesting stock options are forms of incentive compensation that are inherently
performance-based, since their eventual value to the recipient is directly linked to the stock price, which is
largely driven by company performance. The Cisco Systems, Inc. 2005 Stock Incentive Plan, which was
approved by shareholders at the 2005 Annual Meeting of Shareholders, provides us additional flexibility in
making awards to senior executives by allowing for the use of not only time and performance-vesting stock
options, but also restricted stock, stock units, and stock appreciation rights.
Performance-vesting awards have become more popular and in fiscal 2007 the Compensation Committee
may consider this trend among the various alternatives for long-term equity incentive compensation. However,
we believe that it is in the best interests of shareholders to allow the Compensation Committee the flexibility and
discretion to use and introduce all available compensation and equity incentive tools as appropriate, based on the
circumstances and information available at the time and after consultation with its independent compensation
consultant. This shareholder proposal would unduly limit the Compensation Committee’s flexibility and undercut
its compensation philosophy by requiring that a significant portion of equity compensation be in one particular
form.
Recommendation of the Board of Directors
For all the reasons set forth above, the Board of Directors recommends a vote AGAINST Proposal No. 3.
PROPOSAL NO. 4
SHAREHOLDER PROPOSAL
The Sisters of the Holy Names of Jesus and Mary, Washington Province, 2911 West Fort Wright Drive,
Spokane, Washington 99224, who are the beneficial owners of 1,000 shares of Cisco common stock, joined by
other filers (whose names, addresses and shareholdings will be provided by Cisco promptly upon receipt by
Cisco Investor Relations of any oral or written request), have notified us that they intend to present the following
proposal at the meeting:
Pay Disparity
Cisco Systems
WHEREAS, increasingly, shareholders, the government, citizens and public interest groups are concerned
about the growth in compensation packages for top executives at certain U.S. corporations. These packages have
increased the pay gap between highest and lowest paid employees and weakened the connection between
corporate performance and executive compensation.
We believe that pay for the highest-level executives has become excessive, that management is frequently
rewarded regardless of performance, and that CEOs receive exorbitant pay and bonuses while jobs are being cut
and outsourced to reduce costs and boost share prices. It is our belief that executive compensation systems should
provide a CEO with the incentive to build a successful, sustainable company, that prosperity should be shared
broadly within the company and that profitability should be directed toward providing employment security and
stability.
According to a study released in 2005 by United for a Fair Economy, the disparity between CEO and worker
pay is growing. While CEO pay once bore a reasonable relationship to the pay of the average worker, the gap
now stands at 431-to-1 in 2004, up from 301-to-1 in 2003.
We believe that the contribution of employees is essential to corporate growth; both the executive and the
workers should share in that success.
In an effort to narrow the gap, Whole Foods Market prevents any executive, including CEO John Mackey,
from earning an amount in salary and bonus that’s more than 14 times what the average worker makes.
Many investors believe that there is a need to restore some measure of proportionality to relative levels of
compensation. According to a review of proxy statements from major U.S. corporations by Mercer Human
Resource Consulting for the Wall Street Journal, Cisco CEO John Chambers received $62.8 million in total
direct compensation realized in 2005 (1). Meanwhile, total shareholder return was down 8.5% over one year and
down 21.1% over 5 years.
(1) Total direct compensation covers salary, bonuses, gains from option exercises, other long-term incentive
payouts and the value of restricted shares at the time of grant.
RESOLVED: shareholders request the Board’s Compensation Committee initiate a review of our
company’s executive compensation policies and to make available, upon request, a report of that review by
January 1, 2007 (omitting confidential information and processed at a reasonable cost). We request that the report
include:
1. A comparison of the total compensation package of top executives and our company’s lowest paid
workers in the United States in July 2000 and July 2005.
2. An analysis of changes in the relative size of the gap between the two groups and the rationale
justifying this trend.
3. An evaluation of whether our top executive compensation packages (including, but not limited to,
options, benefits, perks, loans and retirement agreements) are “excessive” and should be modified.
4. An explanation of whether the issues of sizable layoffs or the level of pay of our lowest paid
workers should result in an adjustment of executive pay to “to more reasonable and justifiable
levels.”
Cisco’s Statement in Opposition to Proposal No. 4
The Board of Directors believes this proposal does not serve the best interests of Cisco or its
shareholders and recommends a vote AGAINST it.
We believe that we currently have in place a fair and reasonable pay package for all employees. Our
compensation structure is egalitarian in that the same components of compensation (base salary, cash bonus and
stock incentives) are used at all levels of the organization and no other compensation is used at any level (with
the exception of certain commission-based compensation for our sales force). Performance, both at the company
and individual level, is the primary criterion used to determine the amount of all variable compensation awards.
Because performance is the primary driver of the majority of our compensation programs, the annual amount
received and the disparity from one individual to the next with the same level of responsibility is the direct result
of the individual’s performance for that year. Not surprisingly, the employees with the most responsibility in our
organization have the largest percentage of their compensation “at risk” based on achievement of both company
and individual performance goals. The Compensation Committee, which is comprised solely of independent
directors, oversees all compensation awarded to our senior executives and the equity and employee benefit plans
and programs in which they participate. The Compensation Committee reviews the performance of our senior
executives in achieving our goals and objectives to ensure that they are reasonably and effectively compensated
in a manner consistent with our strategy and performance. We refer you to the “Compensation Philosophy and
Objectives” of the Compensation Committee on page 23 of this proxy statement for more information on the
philosophy and objectives followed in structuring compensation for our senior executives.
We also refrain from offering exclusive perquisites to our senior executives or other employees, including
(subject to limited acquisition-related exceptions) country club memberships, private use of corporate assets
(such as aircraft, apartments or luxury boxes), supplemental retirement funds, tax-sheltered accounts or any
similar perquisites, and our senior executives have the same components (base salary, cash bonuses and stock
incentives) of total direct compensation as do all of our employees. Moreover, the Compensation Committee
believes that there is internal pay equity and that the compensation of our senior executives is reasonable.
We further note that as a public reporting company, information about the compensation levels of our CEO
and other highest paid executives is furnished in our annual proxy materials. We refer you to the “Summary
Compensation Table” on page 27 of this proxy statement for the compensation earned by Cisco’s Chief
Executive Officer and the four other highest paid executive officers.
We believe that our egalitarian performance-based compensation structure is both equitable and appropriate
for our workforce while still creating incentive to drive value creation for our shareholders.
Recommendation of the Board of Directors
For all the reasons set forth above, the Board of Directors recommends a vote AGAINST Proposal No. 4.
PROPOSAL NO. 5
SHAREHOLDER PROPOSAL
Boston Common Asset Management, LLC, 84 State Street, Suite 1000, Boston, Massachusetts 02109, a
beneficial owner of 108,266 shares of Cisco common stock, joined by other filers (whose names, addresses and
shareholdings will be provided by Cisco promptly upon receipt by Cisco Investor Relations of any oral or written
request), have notified us that they intend to present the following proposal at the meeting:
INTERNET FRAGMENTATION REPORT
WHEREAS:
On February 15, 2006, Cisco Systems, Yahoo, Google and Microsoft testified before the Committee on International Relations of the U.S. House of Representatives about alleged complicity in human rights violations in China;
Mark Chandler, General Counsel of Cisco Systems, testified that:
“Some countries have chosen to restrict or limit access to information on the Internet based on political
considerations…. While many have commented on the activities of the Chinese government in this regard,
the issue is, in fact, global. Some Middle Eastern countries block sites critical of their leadership.”
“Efforts are underway…to balkanize the Internet. Policies which promote that—even inadvertently—will
undermine rather than support the many projects which help users evade censorship and will exacerbate
rather than solve the problems we are discussing today.”
“The liberating power of the Internet depends on its existence as one global Internet. … Any policies in this
area should, we believe, proceed from the realization that its very global nature provides a unique tool for
the dissemination of ideas and cultivation of freedoms. We should do nothing to disturb its promise.”
Cisco sells its products, including Internet and surveillance technology, primarily through resellers, to
government agencies and state-owned entities throughout the world. The U.S. State Department and others have
documented how various governments, including several governments with which our Company does business,
monitor, censor and jail Internet users, through manipulation of Internet technology.
Mr. Chandler testified that the key to the growth of the Internet “has been the standardization of one global
network. This has been and remains the core of Cisco’s mission.”
In October 1998, Cisco announced it was selected as a key supplier for building China’s nation-wide IP
backbone. China’s network has been called “the Great Firewall of China”, and has become synonymous with the
censored, closed network which, according to Mr. Chandler, threatens the realization of Cisco’s core mission.
The US State Department has also documented concerted efforts to thwart the development of one global
Internet in Saudi Arabia, where Cisco recently announced a five year investment of over $265 Million and has
over 150 Cisco Partners.
Legislation was introduced in the House prohibiting, “business from cooperating with officials of Internet-restricting
countries in effecting the political censorship of on-line content.” The proposed legislation currently
provides for both fines and jail time (The Global Online Freedom Act of 2006 (H.R. 4780)).
RESOLVED:
Shareholders request the Board to publish a report to shareholders within six months, at reasonable expense
and omitting proprietary information, providing a summarized listing and assessment of concrete steps the
company could reasonably take to reduce the likelihood that its business practices might enable or encourage the
violation of human rights, including freedom of expression and privacy, or otherwise encourage or enable
fragmentation of the Internet.
Supporting Statement:
The requested study should include a company-wide review of company policies, practices and indicators
related to the impact of the company’s activities on fundamental human rights and the development of a
fragmented Internet.
Cisco’s Statement in Opposition to Proposal No. 5
The Board of Directors believes this proposal does not serve the best interests of Cisco or its
shareholders and recommends a vote AGAINST it.
Cisco’s products are helping to drive the greatest global expansion of information availability and individual
expression in the history of the planet. Our business practices are designed to and strive to promote, among other
things, freedom of expression, privacy and other fundamental personal freedoms. Our codes of conduct,
employee policies and guidelines reflect this design and incorporate a variety of laws and ethical principles
including those pertaining to personal freedoms. Our products have been instrumental to the evolution of the
Internet into the medium it is today, providing access, expression and community across the globe. We share the
proponents’ desire to promote human rights, including freedom of expression, access and community, and are
continually evaluating and addressing these issues within our business practices and the communities in which
we operate. We are committed to evolving and enhancing these practices. We also have a strict requirement of
compliance with US Government policies, designed in part to reflect human rights concerns, regarding export
and use of our products. We therefore believe that the preparation of the report requested by this proposal is
unnecessary in light of our current efforts and established policies and practices relating to human rights.
Our Corporate Citizenship Council (the “Council”), consisting of an executive committee and a broad-based
global membership of our management, oversees and endeavors to continuously improve our Corporate Social
Responsibility (“CSR”) programs. In particular, the Council evaluates our performance relating to CSR by
assessing our social, ethical and environmental practices and policies and drives change, where necessary, to
enhance the performance of our core business operations. Information about the Council can be found on our
Corporate Citizenship website at www.cisco.com, by clicking on “About Cisco,” and then on “Corporate
Citizenship.” We maintain a specific corporate policy on human rights and other codes and policies addressing
human rights, all of which are publicly available through or described on our Corporate Citizenship website.
In 2005, we issued a Corporate Citizenship Report which addressed our performance in the areas of human
rights generally, our progress towards the principles of the United Nations Global Compact, specifically,
employee welfare, diversity, training and development, supplier diversity and ethics, environmental impact of
product design and lifecycle and our facilities and operations, and our social investments across the world. We
are committed to publishing an update of this report in the fall of 2006 and intend to issue regular updates
thereafter. We believe the preparation and issuance of this report, together with future updates, addresses the
intent of the proponents’ proposal.
As described above, we have implemented policies and practices relating to human rights which are publicly
available to shareholders, and are continually in the process of further developing and implementing such
measures. Our Corporate Citizenship Report coupled with our existing, and continually evolving, policies and
practices relating to human rights effectively address the request contained in this proposal. Additionally, we
believe our business practices support the benefits of Internet access to information on a global basis in ways that
would not otherwise be possible. We believe that the preparation of an additional report as requested by the
proponents is unnecessary and believe that the interests of our shareholders will best be served if we continue to
focus our efforts on further developing and implementing our human rights policies and practices and on
providing Internet access globally.
Recommendation of the Board of Directors
For all the reasons set forth above, the Board of Directors recommends a vote AGAINST Proposal No. 5.
OWNERSHIP OF SECURITIES
The following table sets forth information known to Cisco with respect to beneficial ownership of Cisco
common stock as of July 29, 2006 for (i) each director and nominee, (ii) each holder of 5.0% or greater of Cisco
common stock, (iii) Cisco’s Chief Executive Officer and the four other highest paid executive officers named in
the Summary Compensation Table below (the “Named Executive Officers”) and (iv) all executive officers and
directors as a group.
Beneficial ownership is determined under the rules of the Securities and Exchange Commission and
generally includes voting or investment power with respect to securities. Except as indicated in the footnotes to
this table and pursuant to applicable community property laws, to Cisco’s knowledge the persons named in the
table below have sole voting and investment power with respect to all shares of common stock beneficially
owned. The number of shares beneficially owned by each person or group as of July 29, 2006 includes shares of
common stock that such person or group had the right to acquire on or within 60 days after July 29, 2006,
including, but not limited to, upon the exercise of options. References to options in the footnotes of the table
below include only options to purchase shares that were exercisable on or within 60 days after July 29, 2006. For
each individual and group included in the table below, percentage ownership is calculated by dividing the
number of shares beneficially owned by such person or group by the sum of the 6,059,441,709 shares of common
stock outstanding on July 29, 2006 plus the number of shares of common stock that such person or group had the
right to acquire on or within 60 days after July 29, 2006.
Name |
Number of Shares Beneficially Owned
|
Percent Owned
|
Barclays Global Investors, NA, et al (1) |
322,598,178 |
5.3
|
Carol A. Bartz (2) |
233,168 |
*
|
M. Michele Burns (3) |
92,000 |
*
|
Michael D. Capellas (4) |
50,000 |
*
|
Larry R. Carter (5) |
4,504,288 |
*
|
John T. Chambers (6) |
29,040,395 |
*
|
Charles H. Giancarlo (7) |
5,959,277 |
*
|
Dr. John L. Hennessy (8) |
119,858 |
*
|
Richard J. Justice (9) |
3,675,982 |
*
|
Richard M. Kovacevich (10) |
95,629 |
*
|
Roderick C. McGeary (11) |
100,000 |
*
|
James C. Morgan (12) |
308,642 |
*
|
John P. Morgridge (13) |
61,062,917 |
1.0
|
Randy Pond (14) |
3,414,840 |
*
|
Dennis D. Powell (15) |
2,166,207 |
*
|
Steven M. West (16) |
206,485 |
*
|
Jerry Yang (17) |
158,187 |
*
|
All executive officers and directors as a group (21 Persons)(18) |
120,332,961 |
2.0
|
* Less than one percent.
(1) Based on information set forth in a Schedule 13G filed with the Securities and Exchange Commission on
January 26, 2006 by Barclays Global Investors, NA and certain related entities, reporting sole power to
vote or direct the vote over 281,277,926 shares and sole power to dispose or direct the disposition of
322,598,178 shares. The address of Barclays Global Investors, NA is 45 Fremont Street, San Francisco,
CA 94105.
(2) Represents 95,540 shares held by the Carol Ann Bartz (Living) Trust, 2,628 shares held by Ms. Bartz’s
spouse and options to purchase 135,000 shares.
(3) Includes options to purchase 90,000 shares.
(4) Represents options to purchase 50,000 shares.
(5) Includes 2,588 shares held by the Carter Revocable Trust dated October 18, 1994 and options to purchase
4,467,499 shares.
(6) Includes 1,000,000 shares held in grantor retained annuity trusts and options to purchase 25,550,001
shares.
(7) Includes 664,330 shares held in the Giancarlo Family Trust, 800 shares held in trust for the benefit of each
of Mr. Giancarlo’s two daughters and options to purchase 5,284,166 shares.
(8) Represents 11,858 shares held in the Hennessy 1993 Revocable Trust, 3,000 shares held in trust for the
benefit of Dr. Hennessy’s children and options to purchase 105,000 shares.
(9) Includes 9,460 shares held by the 1990 Justice Family Trust and options to purchase 3,657,499 shares.
(10) Includes 21,215 shares held in the Richard & Mary Jo Kovacevich 2001 Trust, 49 shares held by
Mr. Kovacevich’s spouse, and options to purchase 70,000 shares.
(11) Includes options to purchase 70,000 shares.
(12) Represents 13,642 shares held in the Morgan Family Trust and options to purchase 295,000 shares.
(13) Includes 50,582,330 shares held by John P. Morgridge and Tashia F. Morgridge as Trustees of the
Morgridge Family Trust (UTA DTD 6/30/88), 10,000,000 shares held by the Morgridge Family
Investments LP, 90,238 shares held by Mr. Morgridge’s spouse, Tashia F. Morgridge, and options to
purchase 115,000 shares. The sole general partner of the Morgridge Family Investments LP is the
Morgridge Family Trust (UTA DTD 6/30/88) and its trustees are deemed to beneficially own and share
voting and investment power of the shares held by Morgridge Family Investments LP.
(14) Includes 36,484 shares held by the Randall & Cynthia Pond Revocable Living Trust and options to
purchase 3,356,501 shares.
(15) Includes options to purchase 2,154,916 shares.
(16) Represents 1,085 shares held by the West-Karam Family Trust, 400 shares held by Mr. West’s spouse and
options to purchase 205,000 shares.
(17) Represents 34,993 shares held in the Jerry Yang 1996 Charitable Remainder Trust, 3,194 shares held in the
Jerry Yang 1996 Revocable Trust and options to purchase 120,000 shares.
(18) Includes options to purchase 53,665,976 shares. Also includes shares beneficially owned by Ms. Rafael,
who will be an executive officer until September 20, 2006, and Mr. Chadwick, who was appointed an
executive officer effective September 20, 2006.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires Cisco’s executive officers, directors and
persons who own more than 10% of Cisco’s common stock to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. These persons are required to provide Cisco with
copies of all Section 16(a) forms that they file. Based solely on Cisco’s review of these forms and written
representations from the executive officers and directors, Cisco believes that all Section 16(a) filing requirements
were met during fiscal year 2006. A late report was filed on behalf of Larry Carter relating to a portion of a fiscal
year 2002 charitable gift transaction involving 500 shares.
Equity Compensation Plan Information
The following table provides information as of July 29, 2006 with respect to the shares of Cisco common
stock that may be issued under existing equity compensation plans. The category “Equity compensation plans
approved by security holders” in the table below consists of the 2005 Stock Incentive Plan, the 1996 Stock
Incentive Plan, and the Employee Stock Purchase Plan and its sub-plan, the International Employee Stock
Purchase Plan. The category “Equity compensation plans not approved by security holders” in the table below
consists of the 1997 Supplemental Stock Incentive Plan (the “Supplemental Plan”), the Cisco Systems, Inc. SA
Acquisition Long-Term Incentive Plan (the “Acquisition Plan”) that was adopted in connection with Cisco’s
acquisition of Scientific-Atlanta, Inc. in accordance with applicable NASDAQ listing standards, and options to
purchase shares of Cisco common stock that were issued to replace cancelled options in connection with Cisco’s
acquisition of Latitude Communications, Inc. The table does not include information with respect to shares
subject to outstanding options granted under other equity compensation arrangements assumed by Cisco in
connection with mergers and acquisitions of the companies that originally granted those options.
Plan Category |
Number of securities to be issued upon exercise of outstanding options, warrants and rights (1)
|
Weighted average exercise price of outstanding options, warrants and rights
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
|
|
(a)
|
(b)
|
(c)
|
Equity compensation plans
approved by security holders |
1,387,467,860 |
$25.48 |
547,365,740(2) |
Equity compensation plans not
approved by security holders |
6,942,104(3)(4) |
$22.93 |
15,731,218(5) |
Total |
1,394,409,964(3)(6) |
$25.46 |
563,096,958(7) |
(1) Excludes purchase rights currently accruing under the Employee Stock Purchase Plan including its sub-plan,
the International Employee Stock Purchase Plan.
(2) Includes shares available for future issuance under the Employee Stock Purchase Plan including its
sub-plan, the International Employee Stock Purchase Plan. As of July 29, 2006, as reported in Cisco’s 2006
Annual Report on Form 10-K, an aggregate of 98,855,895 shares of common stock were available for future
issuance under this purchase plan. Also includes up to 32,926,725 shares that may be granted as direct
issuances under the 2005 Stock Incentive Plan and up to 951,310 shares that may be granted to independent,
non-employee consultants as direct issuances under the 1996 Stock Incentive Plan. Under the 2005 Stock
Incentive Plan, non-employee directors may also elect to receive fully vested shares of common stock in
lieu of all or a specified portion of their regular annual cash retainer based on the fair market value of the
shares on the date any regular annual cash retainer would otherwise be paid.
(3) Represents outstanding options to purchase 2,783,223 shares of common stock under the Supplemental Plan
and outstanding options to purchase 3,770,751 shares of common stock under the Acquisition Plan, and
outstanding options to purchase 388,130 shares of common stock that were issued to replace cancelled
options in connection with Cisco’s acquisition of Latitude Communications, Inc.
(4) Excludes options, warrants and other equity rights assumed by Cisco in connection with mergers and
acquisitions, other than options assumed under the Acquisition Plan. As of July 29, 2006, a total of
51,964,673 shares of common stock were issuable upon exercise of outstanding options under those
assumed arrangements. The weighted average exercise price of those outstanding options is $14.80 per
share. No additional awards may be granted under those assumed arrangements.
(5) Represents 9,923,377 shares available for issuance under the Acquisition Plan (including up to 2,881,140
shares that may be granted as direct issuances or stock units) and 5,807,841 shares available for issuance
under the Supplemental Plan. Although securities are available for issuance under the Supplemental Plan,
Cisco will no longer make option grants or share issuances under the Supplemental Plan.
(6) As of July 29, 2006, the aggregate number of shares issuable upon exercise of outstanding options as
reported in Cisco’s 2006 Annual Report on Form 10-K were 1,446,374,637 shares, which included the
51,964,673 shares issuable under the assumed equity rights described in footnote (4) above.
(7) As of July 29, 2006, 100,583,120 shares were available for future issuance under the 1996 Stock Incentive
Plan, 347,926,725 shares were available for future issuance under the 2005 Stock Incentive Plan, 9,923,377
shares were available for future issuance under the Acquisition Plan, and 5,807,841 shares were available
for future issuance under the Supplemental Plan for an aggregate total of 464,241,063 shares available for
future issuance under stock incentive plans, as reported in Cisco’s 2006 Annual Report on Form 10-K. The
shares available for future issuance under the Employee Stock Purchase Plan were 98,855,895 shares, as
reported in Cisco’s 2006 Annual Report on Form 10-K.
The 1997 Supplemental Stock Incentive Plan
The Supplemental Plan was implemented by the Board of Directors on July 31, 1997. The Supplemental Plan is
a non-shareholder approved plan, and Cisco will no longer make option grants or share issuances under the
Supplemental Plan. Options may be granted and direct share issuances of common stock may be made under the
Supplemental Plan to employees of Cisco (or any parent or subsidiary corporation) who are neither officers nor board
members at the time of grant. The Board of Directors has authorized 9,000,000 shares of common stock for issuance
under the Supplemental Plan. All option grants will have an exercise price per share, and all share issuances will have
a purchase price per share, equal to the closing selling price per share of common stock on the grant or issuance date.
Each option or share issuance may be subject to vesting. Any unvested options or share issuances will immediately
vest and become exercisable in full upon certain changes in ownership of Cisco if the options are not assumed or
replaced by the acquiring entity or the repurchase rights relating to share issuances are not assigned to the acquiring
entity, as applicable. All options are non-statutory options under the federal tax law. As of July 29, 2006, options
covering 2,783,223 shares of common stock were outstanding under the Supplemental Plan, 5,807,841 shares
remained available for future option grants or share issuances, and options covering 408,936 shares had been
exercised. No option grants or share issuances were made in fiscal 2006 under the Supplemental Plan.
The Cisco Systems, Inc. SA Acquisition Long-Term Incentive Plan
In connection with Cisco’s acquisition of Scientific-Atlanta, Inc. on February 24, 2006, Cisco assumed,
amended and restated Scientific-Atlanta’s 2003 Long-Term Incentive Plan (renaming it the Cisco Systems, Inc. SA
Acquisition Long-Term Incentive Plan). The Board of Directors has reserved an aggregate of 17,587,049 shares of
Cisco common stock for issuance under this plan (including 2,760,006 shares subject to issuance upon the exercise
of outstanding stock options assumed in connection with the acquisition, which will become available for grant
under this plan in the future to the extent such options expire unexercised or are cancelled). Only employees of
Cisco and its subsidiaries and affiliates who (i) had been employed by Scientific-Atlanta or its subsidiaries on or
after the acquisition, and (ii) were not employed by Cisco or its subsidiaries at the time of the acquisition, may
receive awards under this plan. The plan permits the award of stock options (both non-statutory and incentive stock
options), stock grants, stock units and stock appreciation rights. Stock options and stock appreciation rights under
this plan may be granted for periods of up to nine years and at prices no less than the fair market value of the shares
on the date of grant. Stock grants may and stock units must be issued for no consideration. Stock appreciation rights
and stock units may be exercised for or settled in cash, shares of Cisco common stock or a combination of cash and
shares. Each award may be subject to vesting. In general, awards cease vesting in the event a participant’s
employment or services with Cisco or its subsidiaries terminates. Each outstanding award under this plan that is
subject to vesting provisions will vest in full and, if applicable, become immediately exercisable in the event that
Cisco is acquired by merger or asset sale, unless the award or related agreement is assumed or replaced by the
acquiring entity, or in the event there is a hostile change in control or ownership of Cisco, whether through a tender
or exchange offer for more than thirty-five percent of Cisco’s outstanding voting securities which the Board of
Directors does not recommend the shareholders to accept, or a change in the majority of the members of the Board
of Directors as a result of one or more contested elections for board membership. As of July 29, 2006, options
covering 3,770,751 shares of common stock were outstanding under the Acquisition Plan, 9,923,377 shares
remained available for future grants of awards, 3,715,860 shares were issued directly and options covering 177,061
shares had been exercised.
Replacement Latitude Options
On January 12, 2004, Cisco acquired Latitude Communications, Inc. (“Latitude”). As part of this
transaction, options to purchase Latitude common stock held by employees who continued to be employed by
Cisco or Latitude following the transaction were cancelled and replaced with an aggregate of 492,985 options to
purchase shares of Cisco common stock. The Latitude replacement options vest on the same vesting schedule as
the cancelled options, and have a maximum term of nine (9) years. Each Latitude replacement option may have
accelerated with respect to 50% of the then-unvested shares if the related employee was terminated under certain
circumstances within two years of the effective date of the transaction.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
Compensation and Management Development Committee Report
The information contained in this report shall not be deemed to be “soliciting material” or “filed” or
incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Securities
Exchange Act of 1934, except to the extent that Cisco specifically incorporates it by reference into a document
filed under the Securities Act of 1933 or the Securities Exchange Act of 1934.
The Compensation and Management Development Committee’s (the “Compensation Committee”) basic
responsibility is to review the performance and development of Cisco’s management in achieving corporate goals
and objectives and to assure that Cisco’s senior executives are compensated effectively in a manner consistent
with Cisco’s strategy, competitive practice, and the requirements of the appropriate regulatory bodies. Toward
that end, the Compensation Committee oversees, reviews and administers all of Cisco’s compensation, equity
and employee benefit plans and programs.
Compensation Philosophy and Objectives
Cisco operates in the extremely competitive and rapidly changing high technology industry. The
Compensation Committee believes that the compensation programs for Cisco’s executive officers should be
designed to attract, motivate and retain talented executives responsible for the success of Cisco and should be
determined within a framework based on the achievement of designated financial targets, individual contribution,
customer satisfaction and financial performance relative to that of Cisco’s competitors. Within this overall
philosophy, the Compensation Committee’s objectives are to:
- Offer a total compensation program that is flexible and takes into consideration the compensation
practices of a group of specifically identified peer companies (the “Peer Companies”) and other selected
companies with which Cisco competes for executive talent.
- Provide annual variable cash incentive awards that take into account Cisco’s overall financial
performance in terms of designated corporate objectives, as well as individual contributions and a
measure of customer satisfaction. In addition, discretionary awards may be provided to recognize
extraordinary achievements and/or ensure that annual cash incentive awards for executive officers are
competitive at or above the 75th percentile among the Peer Companies.
- Align the financial interests of executive officers with those of shareholders by providing appropriate
long-term, equity-based incentives, retention awards and stock ownership requirements.
Compensation Components and Process
The three material elements of Cisco’s executive officer compensation are: (i) base salary, (ii) variable cash
incentive awards and (iii) long-term, equity-based incentive awards.
The Compensation Committee determines the compensation levels for Cisco’s executive officers and
considers compensation data and recommendations provided by management. This data is drawn from multiple
nationally recognized, similarly sized technology companies identified as Peer Companies and from appropriate
survey data. A significant number of the Peer Companies are listed in the S&P Information Technology Index,
which is included in the Stock Performance Graph for this Proxy Statement. Certain companies not included in
this Index were considered Peer Companies because Cisco competes for executive talent with those companies.
These companies include AT&T Inc., Extreme Networks, Inc., F5 Networks, Inc., Foundry Networks, Inc.,
Nortel Networks Corporation and Verizon Communications Inc. However, some organizations in the S&P
Information Technology Index were excluded from the Peer Company list because they were not considered
competitors for executive talent or because compensation information was not available. The Compensation
Committee then meets with its independent compensation consultant, Frederic W. Cook & Co., Inc., to review
and evaluate management’s recommendations.
The positions of Cisco’s Chief Executive Officer and executive officers were compared with those of their
counterparts at the Peer Companies, and the market compensation levels for comparable positions were
examined to determine base salary, target incentives and total cash compensation. In addition, the practices of the
Peer Companies concerning long-term, equity-based incentive awards were reviewed.
Base Salary. The base salary for each executive officer is determined at levels considered appropriate for
comparable positions at the Peer Companies. Cisco’s policy is to generally target base salary levels for executive
officers at the 50th percentile of compensation among the Peer Companies.
Variable Cash Incentive Awards. The Compensation Committee believes that a substantial portion of the
annual compensation of each executive officer should be in the form of variable cash incentive pay, and Cisco’s
general policy is to target annual cash incentive awards at or above the 75th percentile among the Peer
Companies. The annual cash incentive awards for executive officers, other than the Chief Executive Officer
whose annual cash incentive award is described in the below section entitled “CEO Compensation,” for fiscal
year 2006 were determined under Cisco’s 2006 Professional and Leadership Incentive Plan (the “PLI Plan”) with
reference to Cisco’s achievement of established financial performance goals, customer satisfaction criteria and
the executive’s individual contribution. Under the PLI Plan, a target award is set for each participating executive
officer and such target award is stated as a percentage of the executive officer’s base salary for fiscal 2006.
Target awards under the PLI Plan for executive officers generally range from 50% to 60% of base salary. Actual
awards, if any, are based on the extent to which Cisco achieves its financial performance goals, the level of
customer satisfaction and an assessment of the executive’s contribution. In fiscal 2006, Cisco met its financial
performance goals and exceeded its customer satisfaction goals. The awards paid reflect these results along with
the recognition of individual contribution. For fiscal year 2006, the financial performance goal was worldwide
revenue and profit before interest and taxes. Bonus payments pursuant to the PLI Plan to the Named Executive
Officers were made as follows: Charles H. Giancarlo, $646,380; Richard J. Justice, $646,380; Randy Pond,
$646,380; and Dennis D. Powell, $610,470.
In recognition of Cisco’s record sales in fiscal 2006 and reflecting the Compensation Committee’s desire to
pay Cisco’s top performers bonuses that reflect competitive practices, on September 14, 2006, the Compensation
Committee exercised its discretion and approved additional discretionary cash bonuses to executive officers,
including the Named Executive Officers. Additional discretionary bonus payments for fiscal year 2006 to the
Named Executive Officers were as follows: Charles H. Giancarlo, $500,000; Richard J. Justice, $470,000; Randy
Pond, $350,000; and Dennis D. Powell, $450,000.
Long-Term, Equity-Based Incentive Awards. The goal of Cisco’s long-term, equity-based incentive awards
is to align the interests of executive officers with shareholders and to provide each executive officer with an
incentive to manage Cisco from the perspective of an owner with an equity stake in the business. The
Compensation Committee determines the size of the long-term, equity-based incentives according to each
executive’s position within Cisco and sets a level it considers appropriate to create a meaningful opportunity for
reward predicated on increasing shareholder value. In addition, the Compensation Committee takes into account
an individual’s performance history, his or her potential for future responsibility and promotion, and competitive
total compensation targets for the individual’s position and level of contribution. The relative weight given to
each of these factors varies among individuals at the Compensation Committee’s discretion. Finally, to further
align the interests of executive officers and non-employee directors, and shareholders, the Board of Directors has
established stock ownership guidelines. Each executive officer and non-employee director is required to own
shares of Cisco common stock and has a year from the date of appointment to acquire shares.
During fiscal year 2006, the Compensation Committee made option grants to Cisco’s executive officers
under Cisco’s 1996 Stock Incentive Plan. Each grant allows the executive officer to acquire shares of Cisco’s
common stock at a fixed price per share (the closing selling price on the grant date). The option grants will
provide a return only if Cisco’s common stock appreciates over the option term. We refer you to the section
entitled “Executive Compensation and Related Information—Stock Options” of this proxy statement on page 27
for additional information regarding stock option awards to Cisco’s named executive officers in fiscal year 2006.
During fiscal year 2007, in addition to option grants, the Compensation Committee will grant restricted shares
and/or units to executive officers. These grants are part of a program designed to retain key executives and top
performers.
CEO Compensation. During fiscal year 2006, Mr. Chambers’ base salary was $350,000 which will remain
in effect for fiscal year 2007. The Compensation Committee targeted Mr. Chambers’ base salary at less than the
median of base salaries paid to the chief executive officers of the Peer Companies in order to place a greater
percentage of Mr. Chambers’ total cash compensation at-risk and tie such compensation to company
performance.
For fiscal year 2006, Mr. Chambers’ annual bonus was determined in the Compensation Committee’s sole
discretion. Despite Cisco’s record financial results, its attainment of its stated performance goals and
Mr. Chambers’ own performance in producing those results, the Compensation Committee honored
Mr. Chambers’ request that his bonus not increase and the Committee approved a discretionary annual cash
bonus of $1,300,000 which is the same annual cash bonus paid for fiscal year 2005. The Compensation
Committee considers this amount of annual base salary and bonus to be reasonable and competitive.
On September 29, 2005, the Compensation Committee granted Mr. Chambers an option to purchase up to
1,300,000 shares of Cisco common stock at an exercise price of $17.86 per share. The exercise price represented
the closing selling price per share of Cisco’s common stock on the NASDAQ National Market on the grant date.
The option grant places a significant portion of Mr. Chambers’ total compensation at risk, since the option grant
delivers a return only if Cisco’s common stock appreciates over the option term. The Compensation Committee
considers this option grant competitive and appropriate for the following reasons: the option grant is comparable
to equity grants provided to chief executive officers of similarly situated Peer Companies; the size of
Mr. Chambers’ option grant constituted less than one percent of the fiscal year 2006 companywide grant; and
Mr. Chambers’ performance and leadership with Cisco were instrumental in producing the financial results that
Cisco achieved in fiscal year 2005. We refer you to the section entitled “Executive Compensation and Related
Information—Stock Options” on page 27 of this proxy statement for additional information regarding the vesting
of this option grant to Mr. Chambers.
Internal Revenue Code Section 162(m) Policy. In determining executive compensation, the Compensation
Committee considers, among other factors, the possible tax consequences to Cisco and to its executives.
However, tax consequences, including tax deductibility by Cisco, are subject to many factors (such as changes in
the tax laws and regulations or interpretations thereof and the timing and nature of various decisions by
executives regarding options and other rights) that are beyond the control of either the Compensation Committee
or Cisco. In addition, the Compensation Committee believes that it is important for it to retain maximum
flexibility in designing compensation programs. For all of the foregoing reasons, the Compensation Committee,
while considering tax deductibility as one of its factors in determining compensation, will not limit compensation
to those levels or types of compensation that will be deductible. The Compensation Committee will, of course,
consider alternative forms of compensation, consistent with its compensation goals, that preserve deductibility.
Submitted by the Compensation and Management Development Committee
Carol A. Bartz, Chairperson
Michael D. Capellas
James C. Morgan
Jerry Yang
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee during the 2006 fiscal year were Carol A. Bartz, James C.
Morgan, Jerry Yang, Dr. James F. Gibbons, who served as a Director and as a member of the Compensation
Committee from the beginning of the fiscal year through the date of the 2005 annual meeting of shareholders,
and Michael D. Capellas, who was appointed to the Compensation Committee effective July 27, 2006. No
member of this committee was at any time during the 2006 fiscal year or at any other time an officer or employee
of Cisco, and no member of this committee had any relationship with Cisco requiring disclosure under Item 404
of Regulation S-K. No executive officer of Cisco has served on the board of directors or compensation
committee of any other entity that has or has had one or more executive officers who served as a member of the
Board of Directors or the Compensation Committee during the 2006 fiscal year.
Summary of Cash and Certain Other Compensation
The following table sets forth the compensation earned by the Named Executive Officers for services
rendered in all capacities to Cisco and its subsidiaries for each of the last three or fewer fiscal years during which
such individuals served as executive officers. Cisco has not granted restricted stock or stock appreciation rights
to any of the persons listed below during the past three fiscal years. No executive officer who would have
otherwise been includable in such table on the basis of salary and bonus earned for Cisco’s 2006 fiscal year has
been excluded by reason of his or her termination of employment or change in executive officer status during that
fiscal year.
SUMMARY COMPENSATION TABLE
|
Annual Compensation
|
|
Name and Principal Position |
Fiscal Year
|
Salary ($)
|
Bonus ($)(1)
|
Other Annual Compensation ($)
|
Long-Term Compensation Awards Options (#)
|
All Other Compensation ($) (2)
|
John T. Chambers |
2006 |
350,000 |
1,300,000 |
0 |
1,300,000 |
6,704 |
President, Chief Executive |
2005 |
350,000 |
1,300,000 |
0 |
1,500,000 |
8,977 |
Officer and Director |
2004 |
1 |
1,900,000 |
0 |
0 |
0 |
Charles H. Giancarlo |
2006 |
420,769 |
1,146,380 |
0 |
650,000 |
10,272 |
Senior Vice President, |
2005 |
393,500 |
589,680 |
0 |
550,000 |
2,935 |
Chief Development Officer (3) |
2004 |
388,385 |
507,088 |
0 |
600,000 |
6,212 |
Richard J. Justice |
2006 |
420,769 |
1,116,380 |
0 |
525,000 |
6,600 |
Senior Vice President, |
2005 |
400,000 |
550,368 |
0 |
700,000 |
6,300 |
Worldwide Field Operations |
2004 |
414,862 |
752,045 |
0 |
600,000 |
6,150 |
Dennis D. Powell |
2006 |
410,385 |
1,060,470 |
0 |
400,000 |
6,600 |
Senior Vice President and |
2005 |
400,000 |
500,003 |
0 |
550,000 |
6,300 |
Chief Financial Officer |
2004 |
412,500 |
650,808 |
0 |
450,000 |
6,150 |
Randy Pond |
2006 |
420,769 |
996,380 |
0 |
425,000 |
6,300 |
Senior Vice President, Operations, |
2005 |
400,000 |
508,032 |
0 |
550,000 |
7,019 |
Processes and Systems |
2004 |
413,462 |
623,691 |
0 |
600,000 |
5,812 |
(1) Represents cash bonuses earned for the indicated fiscal years.
(2) Represents matching contributions that Cisco made to Cisco’s 401(k) Plan during the fiscal year.
(3) Mr. Giancarlo was appointed an executive officer on August 1, 2004 which was during the 2005 fiscal year.
Mr. Giancarlo did not serve as an executive officer during the 2004 fiscal year.
Stock Options
The following table provides information with respect to the stock option grants made during Cisco’s 2006
fiscal year under Cisco’s 1996 Stock Incentive Plan to each Named Executive Officer. No stock appreciation
rights were granted to the Named Executive Officers during the fiscal year. The options have a maximum term of
nine years measured from the applicable grant date, subject to earlier termination in the event of the optionee’s
cessation of service with Cisco. Each of the options will vest and become exercisable for 20% of the option
shares upon the completion of one year of service measured from the grant date and will become exercisable for
the remaining shares in equal monthly installments over the next 48 months of service thereafter. The exercise
price for each of these options is equal to the closing selling price per share of common stock on the grant date.
Each of the options will immediately vest and become exercisable for all of the option shares in the event Cisco
is acquired by merger or asset sale, unless the options are assumed or replaced by the acquiring entity, or in the
event there is a hostile change in control or ownership of Cisco, whether through a tender or exchange offer for
more than thirty-five percent of Cisco’s outstanding voting securities which the Board of Directors does not
recommend the shareholders to accept, or a change in the majority of the members of the Board of Directors as a
result of one or more contested elections for board membership. The exercise price of each option may be paid in
cash or in shares of common stock valued at the closing selling price on the exercise date or may be paid with the
proceeds from a same-day sale of the purchased shares. In addition, pursuant to a Compensation Committee
policy which can be revoked or changed at any time, if an optionee dies or becomes terminally ill, his or her
options will generally vest in an amount equal to the greater of 100% of the unvested option shares up to a total
value of $10 million, net of aggregate exercise price, or up to one year of vesting from the date of death or
determination of terminal illness. For purposes of this policy, option shares are valued based on the closing price
per share of common stock on the date of death or determination of terminal illness.
There is no assurance provided to any executive officer or any other holder of Cisco’s securities that the
potential realizable values shown in this table, which are based on assumed 5% and 10% annual rates of
compounded stock price appreciation over the nine-year term of the options as required under the rules of the
Securities and Exchange Commission, will be realized. Actual gains, if any, on option exercises are dependent on
the future performance of Cisco common stock and overall market conditions.
OPTION GRANTS IN LAST FISCAL YEAR
|
Individual Grants
|
Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term
|
|
Number of Securities Underlying Options Granted
|
% of Total Options Granted to Employees in Fiscal Year
|
Exercise Price ($/Share)
|
Expiration Date
|
Name |
5% ($)
|
10% ($)
|
John T. Chambers |
1,300,000 |
0.6506 |
17.86 |
9/29/2014 |
12,800,739 |
31,528,829 |
Charles H. Giancarlo |
300,000 |
0.1501 |
17.80 |
8/12/2014 |
2,944,093 |
7,251,441 |
350,000 |
0.1751 |
17.86 |
9/29/2014 |
3,446,353 |
8,488,531 |
Richard J. Justice |
525,000 |
0.2627 |
17.86 |
9/29/2014 |
5,169,529 |
12,732,797 |
Dennis D. Powell |
400,000 |
0.2002 |
17.86 |
9/29/2014 |
3,938,689 |
9,701,178 |
Randy Pond |
425,000 |
0.2127 |
17.86 |
9/29/2014 |
4,184,857 |
10,307,502 |
Option Exercises and Holdings
The following table sets forth information concerning the exercise of options by each of the Named
Executive Officers during Cisco’s 2006 fiscal year and the unexercised options held by them as of the end of the
fiscal year. The value realized represents the difference between the aggregate closing selling price of the shares
on the date of exercise less the aggregate exercise price paid. The value of unexercised in-the-money options is
based on the closing price of Cisco common stock on July 28, 2006 of $18.08 per share, minus the exercise price,
multiplied by the number of shares issuable upon exercise of the option. These values have not been, and may
never be, realized. No stock appreciation rights were exercised during the fiscal year, and no stock appreciation
rights were outstanding at the end of the fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
|
Number of Shares Acquired on Exercise
|
Value Realized ($)
|
Number of Securities Underlying Unexercised Options at July 29, 2006
|
Value of Unexercised In-the-Money Options at July 29, 2006 ($)
|
Name |
Exercisable
|
Unexercisable
|
Exercisable
|
Unexercisable
|
John T. Chambers |
5,850,000 |
69,674,752 |
25,316,667 |
4,533,333 |
34,149,856 |
3,882,999 |
Charles H. Giancarlo |
900,000 |
12,569,877 |
5,129,999 |
1,545,001 |
9,282,901 |
1,088,048 |
Richard J. Justice |
300,000 |
2,677,685 |
3,572,500 |
1,442,500 |
1,211,450 |
1,164,662 |
Dennis D. Powell |
183,750 |
1,968,151 |
2,089,562 |
1,114,521 |
3,451,875 |
868,302 |
Randy Pond |
150,000 |
1,181,314 |
3,279,416 |
1,249,584 |
3,604,181 |
1,167,200 |
Employment Contracts, Termination of Employment, and Change in Control Agreements
None of Cisco’s executive officers have employment or severance agreements with Cisco, and their
employment could be terminated at any time at the discretion of the Board of Directors.
Each outstanding award to employees under Cisco’s 2005 Stock Incentive Plan and 1996 Stock Incentive
Plan that is subject to vesting provisions will vest in full and, if applicable, become immediately exercisable in
the event that Cisco is acquired by merger or asset sale, unless the award or related agreement is assumed or
replaced by the acquiring entity, or in the event there is a hostile change in control or ownership of Cisco,
whether through a tender or exchange offer for more than thirty-five percent of Cisco’s outstanding voting
securities which the Board of Directors does not recommend the shareholders to accept, or a change in the
majority of the members of the Board of Directors as a result of one or more contested elections for board
membership. Cisco believes that “single trigger” equity vesting is appropriate under the circumstances described
above to ensure that employees are not deprived of their equity when Cisco may not be able to arrange for
appropriate vesting continuation terms and conditions. Cisco does not provide for any excise tax “gross-up”
arrangements for its executive officers. In addition, pursuant to a Compensation Committee policy which can be
revoked or changed at any time, if the holder of an award dies or becomes terminally ill, his or her award will
generally vest in an amount equal to the greater of 100% of the unvested shares subject to the award up to a total
value of $10 million, net of aggregate exercise or purchase price, or up to one year of vesting from the date of
death or determination of terminal illness. For purposes of this policy, shares subject to the award are valued
based on the closing price per share of common stock on the date of death or determination of terminal illness.
On August 23, 2004, Mr. Chambers was granted an option to purchase up to 1,500,000 shares of Cisco
common stock at an exercise price of $19.18 per share under the 1996 Stock Incentive Plan. The option has a
term of nine years measured from the grant date and, if vested, will remain exercisable for the full term even after
his cessation of service except in limited circumstances. The option will vest and become exercisable upon
Mr. Chambers’ completion of seven years of service from the grant date or, if sooner, three years after he ceases
to be President and Chief Executive Officer, provided vesting shall occur no earlier than the fifth anniversary of
the grant date, and is subject to his continued service through that date. For purposes of Mr. Chambers’ stock
option agreement, “service” includes providing services directly to Cisco or employment by educational or
governmental institutions if those institutions’ policies preclude continued service to Cisco. In addition, the
option will immediately vest and become exercisable in the case of Mr. Chambers’ death or permanent disability.
The option will vest in full and become immediately exercisable for all of the option shares in the event that
Cisco is acquired by merger or asset sale, unless the option is assumed or replaced by the acquiring entity, or in
the event there is a hostile change in control or ownership of Cisco, whether through a tender or exchange offer
for more than thirty-five percent of Cisco’s outstanding voting securities which the Board of Directors does not
recommend the shareholders to accept, or a change in the majority of the members of the Board of Directors as a
result of one or more contested elections for board membership.
STOCK PERFORMANCE GRAPH
The information contained in this Stock Performance Graph section should be read in conjunction with the
Compensation and Management Development Committee Report and shall not be deemed to be “soliciting
material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of
Section 18 of the Securities Exchange Act of 1934, except to the extent that Cisco specifically incorporates it by
reference into a document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934.
The graph depicted below shows a comparison of cumulative total shareholder returns for Cisco common
stock with the cumulative total return on the Standard & Poor’s Information Technology Index and the
Standard & Poor’s 500 Index. Shareholder returns over the indicated period are based on historical data and
should not be considered indicative of future shareholder returns.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
AMONG CISCO SYSTEMS, INC.,
THE S & P INFORMATION TECHNOLOGY INDEX
AND THE S & P 500 INDEX
|
7/27/01 |
7/26/02 |
7/25/03 |
7/30/04 |
7/29/05 |
7/28/06 |
CISCO SYSTEMS, INC. |
$100.00 |
$62.01 |
$100.10 |
$109.76 |
$100.47 |
$94.86 |
S&P INFORMATION TECHNOLOGY |
$100.00 |
$59.42 |
$73.54 |
$80.80 |
$89.26 |
$81.81 |
S&P 500 |
$100.00 |
$76.37 |
$84.50 |
$95.63 |
$109.07 |
$114.94 |
Notes:
- The graph covers the period from July 27, 2001, the last trading day before Cisco’s 2002 fiscal year, to
July 28, 2006, the last trading day of Cisco’s 2006 fiscal year.
- The graph assumes that $100 was invested in Cisco common stock and in each index on July 27, 2001, and
that all dividends were reinvested. No cash dividends have been declared on shares of Cisco’s common stock.
AUDIT COMMITTEE REPORT
The information contained in this report shall not be deemed to be “soliciting material” or “filed” or
incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Securities
Exchange Act of 1934, except to the extent that Cisco specifically incorporates it by reference into a document
filed under the Securities Act of 1933 or the Securities Exchange Act of 1934.
The Audit Committee has reviewed and discussed with Cisco’s management and PricewaterhouseCoopers
LLP the audited consolidated financial statements of Cisco contained in Cisco’s Annual Report on Form 10-K
for the 2006 fiscal year. The Audit Committee has also discussed with PricewaterhouseCoopers LLP the matters
required to be discussed pursuant to SAS No. 61 (Codification of Statements on Auditing Standards, AU
Section 380), which includes, among other items, matters related to the conduct of the audit of Cisco’s
consolidated financial statements.
The Audit Committee has received and reviewed the written disclosures and the letter from
PricewaterhouseCoopers LLP required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), and has discussed with PricewaterhouseCoopers LLP its independence
from Cisco.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board of
Directors that the audited consolidated financial statements be included in Cisco’s Annual Report on Form 10-K
for its 2006 fiscal year for filing with the Securities and Exchange Commission.
Submitted by the Audit Committee
Steven M. West, Chairperson
M. Michele Burns
Roderick C. McGeary
SHAREHOLDER PROPOSALS FOR 2007 ANNUAL MEETING OF SHAREHOLDERS
Requirements for Shareholder Proposals to be Considered for Inclusion in Cisco’s Proxy
Materials. Shareholders of Cisco may submit proposals on matters appropriate for shareholder action at
meetings of Cisco’s shareholders in accordance with Rule 14a-8 promulgated under the Securities Exchange Act
of 1934. For such proposals to be included in Cisco’s proxy materials relating to its 2007 Annual Meeting of
Shareholders, all applicable requirements of Rule 14a-8 must be satisfied and such proposals must be received by
Cisco no later than May 28, 2007. Such proposals should be delivered to Cisco Systems, Inc., Attn: Secretary,
170 West Tasman Drive, San Jose, California 95134-1706 (and you are encouraged to send a copy via e-mail to
CorporateSecretary@cisco.com), with a copy to Cisco Systems, Inc., Attn: General Counsel at the same address.
Requirements for Shareholder Proposals to be Brought Before the Annual Meeting. Cisco’s bylaws
provide that, except in the case of proposals made in accordance with Rule 14a-8, for shareholder nominations to
the Board of Directors or other proposals to be considered at an annual meeting of shareholders, the shareholder
must have given timely notice thereof in writing to the Secretary of Cisco not less than sixty nor more than ninety
days prior to the anniversary of the date on which Cisco first mailed its proxy materials for its immediately
preceding annual meeting of shareholders (as specified in Cisco’s proxy materials for its immediately preceding
annual meeting of shareholders). To be timely for the 2007 Annual Meeting of Shareholders, a shareholder’s
notice must be delivered or mailed to and received by Cisco’s Secretary at the principal executive offices of
Cisco between June 27, 2007 and July 27, 2007. However, in the event that the annual meeting is called for a
date that is not within thirty days of the anniversary of the date on which the immediately preceding annual
meeting of shareholders was called, to be timely, notice by the shareholder must be so received not later than the
close of business on the tenth day following the date on which public announcement of the date of the annual
meeting is first made. In no event will the public announcement of an adjournment of an annual meeting of
shareholders commence a new time period for the giving of a shareholder’s notice as provided above. A
shareholder’s notice to Cisco’s Secretary must set forth the information required by Cisco’s bylaws with respect
to each matter the shareholder proposes to bring before the annual meeting.
In addition, the proxy solicited by the Board of Directors for the 2007 Annual Meeting of Shareholders will
confer discretionary authority to vote on (i) any proposal presented by a shareholder at that meeting for which
Cisco has not been provided with notice on or prior to July 27, 2007 and (ii) any proposal made in accordance
with the bylaw provisions, if the 2007 proxy statement briefly describes the matter and how management’s proxy
holders intend to vote on it, if the shareholder does not comply with the requirements of Rule 14a-4(c)(2) under
the Securities Exchange Act of 1934.
SHAREHOLDERS SHARING THE SAME ADDRESS
Cisco has adopted a procedure called “householding,” which has been approved by the Securities and
Exchange Commission. Under this procedure, Cisco is delivering only one copy of the annual report and proxy
statement to multiple shareholders who share the same address and have the same last name, unless Cisco has
received contrary instructions from an affected shareholder. This procedure reduces Cisco’s printing costs,
mailing costs and fees. Shareholders who participate in householding will continue to receive separate proxy
cards.
Cisco will deliver promptly upon written or oral request a separate copy of the annual report and the proxy
statement to any shareholder at a shared address to which a single copy of either of those documents was
delivered. To receive a separate copy of the annual report or proxy statement, you may write or call Cisco’s
Investor Relations Department at Cisco Systems, Inc., 170 West Tasman Drive, San Jose, California 95134-1706,
Attention: Investor Relations, telephone (408) 526-6945. You may also access Cisco’s annual report and proxy
statement on the Investor Relations section of Cisco’s website at www.cisco.com.
If you are a holder of record and would like to revoke your householding consent and receive a separate
copy of the annual report or proxy statement in the future, please contact Automatic Data Processing, Inc.
(“ADP”), either by calling toll free at (800) 542-1061 or by writing to ADP, Householding Department, 51
Mercedes Way, Edgewood, New York 11717. You will be removed from the householding program within 30
days of receipt of the revocation of your consent.
Any shareholders of record who share the same address and currently receive multiple copies of Cisco’s
annual report and proxy statement who wish to receive only one copy of these materials per household in the
future, please contact Cisco’s Investor Relations Department at the address or telephone number listed above to
participate in the householding program.
A number of brokerage firms have instituted householding. If you hold your shares in “street name,” please
contact your bank, broker or other holder of record to request information about householding.
FORM 10-K
CISCO WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF CISCO’S
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JULY 29, 2006, INCLUDING
THE CONSOLIDATED FINANCIAL STATEMENTS, SCHEDULES AND LIST OF EXHIBITS, AND
ANY PARTICULAR EXHIBIT SPECIFICALLY REQUESTED. REQUESTS SHOULD BE SENT TO:
CISCO SYSTEMS, INC., 170 WEST TASMAN DRIVE, SAN JOSE, CALIFORNIA 95134-1706, ATTN:
INVESTOR RELATIONS. THE ANNUAL REPORT ON FORM 10-K IS ALSO AVAILABLE AT
WWW.CISCO.COM.
OTHER MATTERS
The Board of Directors knows of no other matters to be presented for shareholder action at the meeting.
However, if other matters do properly come before the meeting or any adjournments or postponements thereof,
the Board of Directors intends that the persons named in the proxies will vote upon such matters in accordance
with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
Mark Chandler
Secretary
Dated: September 19, 2006
Getting to the Santa Clara Convention Center from San Jose—Highway 101
- Go north on Highway 101 and take the Great America Parkway exit.
- Turn right on Great America Parkway.
- The Convention Center is located at Great America Parkway and Tasman Drive.
- Find the Convention Center Parking Garage at the Hyatt Hotel’s 2nd driveway at Bunker Hill Lane.
Getting to the Santa Clara Convention Center from San Francisco—Highway 101
- Go south on Highway 101 and take the Great America Parkway exit.
- Turn left on Great America Parkway.
- The Convention Center is located at Great America Parkway and Tasman Drive.
- Find the Convention Center Parking Garage at the Hyatt Hotel’s 2nd driveway at Bunker Hill Lane.
Getting to the Santa Clara Convention Center from Oakland—Highway 880
- Take Highway 880 south to Highway 237 west towards Mountain View.
- Follow Highway 237 to the Great America Parkway exit.
- Turn left on Great America Parkway.
- The Convention Center is at Great America Parkway and Tasman Drive.
- Find the Convention Center Parking Garage at the Hyatt Hotel’s 2nd driveway at Bunker Hill Lane.
|